Euro for Poland likely after 2012, 2008 budget gap at 26 bln zlotys - official

WARSAW (Thomson Financial) - Concerns over higher inflation and an overvalued currency may delay Poland's entry to the euro until 2013, a senior official from the new pro-business government told daily Gazeta Wyborcza today.

Civic Platform party officials have long said Poland should join the single currency around 2012-13. Parliamentary party leader Zbigniew Chlebowski said the move was likely to come later rather than sooner in that window.

'Nothing has really changed here, but a delay of around a year may be coming into play,' he told the newspaper in an interview.

'The world economy is slowing, there are problems on the fuel market, food prices are rising, which leads to a rise in inflation in Poland. All of this may delay Poland's entry to the euro a little.'

Chlebowski also trimmed his estimates for a cut in the budget deficit next year, saying the new government would seek to reduce the shortfall to 26 bln zlotys from the outgoing cabinet's 28.6 bln.

He told Thomson Financial News last week the target was to cut the gap to 25 bln zlotys.

'It may be 26 bln zlotys, although we want it to be less,' he said.

After the Civic Platform won elections last month, some market players began to speculate on the EU's largest former communist economy joining the euro as early as 2011.

Hopes of a swift move to euro zone membership were also encouraged by the appointment of a known euro enthusiast, Central European University professor Jacek Rostowski, as finance minister. Rostowski has not spoken to media about the euro or the state budget since the elections on Oct 21.

'The minister has somewhat refined his views, in particular since today we have a zloty that is too strong against the euro,' Chlebowski said.

'Volatility on the foreign exchange market may require a reaction from the National Bank of Poland, once we are in the euro we will lose this option.'

Chlebowski said he was also concerned at the experience of the Baltic States, where inflation has soared toward double figures in recent months, aggravated by years of a stiffer currency board regime.

Analysts say Poland's floating rate currency regime shields it from similar overheating. But he also added that the government had more work to do to persuade Poles of the benefits of the euro.

Source: By Patrick Graham,